Second quarter earnings season is winding down. Nearly all companies have reported, and the majority beat expectations as margin estimates continue to rise. 

Second quarter earnings season is winding down, but earnings are up, and better than expected. Despite some potentially concerning signals from the real economy, including muted job gains, and possible seasonal volatility, we remain constructive on equities. A positive second quarter earnings season strengthens our conviction.

Last week the market received mixed messages about the condition of the labor market. Nonfarm payrolls came in lower than expected, and the previous two months of data were revised sharply lower. Yet initial jobless claims were also lower, and the unemployment rate remains in range. We believe the U.S. economy can still deliver modest growth this year.

This year has been characterized by policy uncertainty and fears about the potential impact of tariffs on inflation. While many expected the consumer would crack amid weaker sentiment, it hasn’t happened yet. Retail sales remain resilient, supported by a job market that remains good enough to support spending.

This year has been characterized by policy uncertainty and fears about the potential impact of tariffs on inflation. While many expected the consumer would crack amid weaker sentiment, it hasn’t happened yet. Retail sales remain resilient, supported by a job market that remains good enough to support spending.

After years of outperformance, the U.S. underperformed other regions during the first quarter. While the debate over whether U.S. exceptionalism can persist continues, the U.S. has resumed its leadership since mid-April - led by the technology sector. 

The S&P 500 recently hit another all-time high. Is it therefore time to exercise more caution? Not in our view. We see the potential for further upside, and history is on our side.

The recent Middle East conflict sparked concerns surrounding Iran’s oil supply and the impact it could have on oil prices and the current disinflation trend. However, the price of oil is now at the level it was before the first strike on Iran. Due to the shale revolution, the oil market is ruled by new dynamics.

This year U.S. equities have underperformed the rest of the world due largely to policy uncertainty. However, an important driver of U.S. equity outperformance over the longer term has been stronger earnings and profit margins relative to peers, and our view is these factors will continue to drive long-term U.S. exceptionalism.

Inflation came in cooler than expected in May. In fact, it’s down from January’s growth rate of 3.0% year over year to 2.4%. While stickier services components such as shelter have driven this decline, could the recent uptick in oil prices and higher tariffs pose headwinds?

The labor market is an important consideration when evaluating the economic growth prospects of a country. In the U.S., unemployment and demographics metrics look favorable compared to other major economies. 

By no measure are we seeing a booming job market, but we are also not seeing a deteriorating one. In fact, current labor metrics lead us to conclude that the job market remains “good enough” to support our economic growth expectations for the year.

Lately, non-U.S. equities are outperforming the U.S. Is U.S. exceptionalism dead? Productivity growth tells a more positive story.

While some fear the S&P 500 is too concentrated in its top 10 stocks, our analysis tells us something different.

International equity markets are outperforming the U.S. year to date. Is this a durable trend? According to relative earnings growth, the U.S. still has an advantage.